Reference no: EM133168857

Question - The management team of XYZ Ltd was faced with a financial crisis. The entity was in breach of a loan agreement and had to repay a major loan at short notice. To raise the necessary cash, one of XYZ Ltd's successful subsidiaries was sold. While this solved the liquidity and solvency problems, it reduced future earning potential. As chief accountant, John has been asked to provide a list of 20 financial ratios along with some other operating statistics relative to XYZ Ltd's first-quarter financial data and operations.

Two days after John provides the ratios and data requested, he is asked by the public relations officer to verify the accuracy of the financial and operating data contained in a press release that is being prepared. In the press release, the managing director highlights the sales increase of 25% over the last year's first quarter and the positive change in the current ratio from 1.5:1 last year to 3:1 this year. The managing director also emphasises that production was up 50% over the previous year's first quarter. John notes that the release contains only positive or improved ratios and none of the negative or deteriorated ratios. For instance, the profit margin, which showed slight improvement from 6% to 7%, was reported but the interest cover, which had declined, was excluded. None of the ratios used profit from continuing operations, which was considerably lower. For instance, the profit margin from continuing operations was only 3%. The public relations officer emphasises: "The managing director wants this release by early this afternoon".

Required - Analyse the above case by answering the following questions:

1. What are the relevant facts?

2. Who are the primary stakeholders and why?

3. What are the ethical issues for John? Include and critically analyse the different perspectives of utilitarianism versus rights (deontology).

4. What possible courses of action could John follow? Explain your answer.

5. Critically evaluate which course of action you would choose if you were John and explain why.